The future of the retail sector has been a hot topic recently with the rise of online retail and a trend towards automation, accelerated by increased costs to businesses such as the National Living Wage and the Apprenticeship levy. The 1970s and 1990s (the so-called golden age of retail) saw steady progress in productivity in the retail industry, but despite the ‘digital revolution’ this flat lined in 2009 and has slumped ever since. It is clear that a new retail sector is now emerging: a leaner, higher value and more productive sector. Madeleine Thomson, the UK retail and consumer lead at PwC, recently commented: “retail remains an industry in flux, with a business model that has ‘worked’ for decades being reshaped at speed”. What do these key changes mean for the jobs market and consequently for recruitment?
Increased costs – the National Living Wage
“Britain is getting a pay rise,” the Chancellor of the Exchequer announced during his first budget after the General Election last year, before introducing the new National Living Wage of £7.20 per hour for those aged over 25 (see our infographic).
The government expects the National Living Wage to increase every year, reaching £9 per hour by 2020. With a significant proportion of minimum wage employees working in retail it’s not surprising that this has impacted the sector. In fact the Centre for Retail Research estimated that the National Living Wage could cost retailers £3.26bn a year in extra pay, NICs and pensions. This looks likely to lead to many job losses. The credit rating agency Moody’s predicted last year that as a response to the NLW, supermarkets are “likely to cut jobs by speeding up automation”. This was confirmed by a British Retail Consortium (BRC) report which found that 60% of jobs in retail are at risk of automation. While we haven’t seen large scale job losses yet, we have already seen retailers adapt by removing bonuses and perks. There are only so many ways employers can cut labour costs before starting to make redundancies.
End of bricks and mortar retail?
Alongside this there has been a great shift towards online retail. Official retail sales statistics for May show that online sales have increased by 21.5% compared with May 2015 and even increased by 6.4% compared with April 2016. The growth is unprecedented. Is the rise of online retail and closure of stores now inevitable?
Not necessarily, according to Robin Winstanley, a Project Manager at IKEA, who recently said at a Fabian Society event on the future of retail that people still enjoy shopping as an experience and therefore keeping physical shops open is important. IKEA exemplifies this – buying a new sofa online is not quite the same as going into the store, trying them out and being able to talk to someone, because as Robin put it, “people like doing business with people.” There will always be demand for high street retail, so maybe it’s not quite the end for bricks and mortar, but it will have to adapt to keep pace with online retail.
Will people even be needed in retail in the future?
With the cumulative effect of rising cost of labour and online retail leading to automation there could be a loss of 900,000 jobs in the retail sector by 2025. So what jobs will be left by 2025? The BRC say that although there will be fewer jobs, those remaining will be better jobs. While we may see a decrease in the number of retail assistants or shelve stockers there will be a greater need for more ‘human’ and ‘warm’ customer facing roles, which demand much greater levels of soft skills. The UK Commission for Employment and Skills (UKCES) recommend that retailers will need to reposition themselves with much more focus on the customer experience, creating a ‘memorable shopping experience’ for consumers in order to keep up with online retail.
There will be greater demand for digital and analytical skills in retail, with the rise of ‘big data’ to analyse consumption patterns and target consumers (with schemes such as Nectar cards and Tesco Club Card). There will also be a greater need for retail workers to have technological literacy to operate new technology both in store and in the back office. UKCES predict that over the coming years lower skilled workers in retail will “face a basic choice of upskilling” or face “redundancy due to automation”. Therefore training in both soft skills and technology will be crucial if the retail industry is to adapt.
Conclusion: recruiters in retail should be ahead of the game
The retail sector is in a state of flux, having to adapt to new costs to business such as the National Living Wage, the Apprenticeship Levy and changes in consumer spending. Automation will lead to job losses and the jobs that are left will require different skills. Recruiters need to be ahead of the game and work with clients to help manage changes. For all you need to know as a recruiter in retail and to keep abreast of these changes, why not get involved with the REC sector group? Please email philip.campbell@rec.uk.com to express your interest.
